Connecticut cities and towns statewide must decide by April 25 how they will incorporate Gov. Ned Lamont’s executive order to provide home and business owners either tax payment deferrals or reduced interest rates on overdue property taxes.

Local property taxes typically are due in July, with interest charged at 1.5% per month — 18% per year — for overdue taxes starting on Aug. 1.

Lamont's April 1 executive order directs towns to adopt one or both of two options to provide tax relief to property owners suffering financial losses during the COVID-19 crisis. Towns either can defer tax payments for 90 days for qualifying property owners to Oct. 1, or offer interest rate reductions to at most 3% for the year on overdue property taxes. Taxes would need to be paid on time in the second option to avoid any interest.

Municipal electric, water and sewer bills from March 10 to July 1 also are included in the order.

The order requires mortgage holders who pay property taxes through escrow payments to make payments on time.

City and town leaders must inform the state Office of Policy and Management by Saturday of their decisions.

Several local municipalities have voted on their preferred options. Montville chose the low interest rate for delinquent tax and water and sewer payments, while Stonington and East Lyme approved 90-day tax payment deferrals for eligible property owners.

“It is our hope that this helps our taxpayers and rate payers in some small fashion,” Montville Mayor Ronald McDaniel said. “While we expect revenue collection to be diminished, a large percentage of real estate taxes are paid through escrowed funds, and we will hopefully receive those funds in a timely manner.”

McDaniel said Montville will rely on its reserve funds if tax revenues decline sharply, but in an emergency might consider a tax anticipation note, a loan paid off when tax revenue is received.

New London, Norwich and Lyme are scheduled to vote Monday, and others will vote later this week.

New London Mayor Michael Passero will recommend the City Council adopt the 90-day deferral for all property taxpayers, except mortgage escrow payments, and utility ratepayers. Passero said he consulted with the city finance director and considered the needs of residents and the city’s good fiscal health, with a reserve fund balance at $15 million.

“We believe we’re going to be on good ground with cash flow,” Passero said.

About 40% of the city’s property tax revenue comes from mortgage escrow accounts and is likely to be paid automatically, he said.

The governor’s order allows cities and towns to restrict relief to businesses, nonprofits, and residents who “can document that they are providing relief to those significantly affected by the COVID-19 pandemic.” The order also allowed cities and towns to extend the relief beyond those criteria.

The Norwich City Council will consider either the 90-day tax deferral or the low interest charged on delinquent bills at its meeting Monday. A resolution on the agenda currently leaves the specific option blank.

Norwich City Manager John Salomone said he will explain the options and the city’s financial picture to the council. Norwich receives about 34% of property tax payments through mortgage holder escrow payments, which would remain on time. The city has an undesignated fund balance of $13.7 million, 10.8% of the current combined city and school budget.

Salomone said if the council chooses the 90-day tax deferral, he would recommend extending it to all property taxpayers, rather than ask city tax office staff to decide which hardship applications should be approved.

“It’s very hard to determine eligibility,” Salomone said. “I don’t think we should be encumber them with that responsibility.”

Norwich Public Utilities spokesman Chris Riley said NPU is examining the options and will give a recommendation to the City Council Monday as well.

“NPU is fully committed to providing our customers, residential and commercial, with support during this unprecedented time,” Riley said. “We've been fully supportive of the State's moratorium on all utility shut-offs and put a hold on requiring security deposits for both residential and commercial customers."

NPU has seen "a very significant drop in revenue" due to COVID-19, Riley said.

Groton Town Manager John Burt said town officials are still running numbers on the governor's options and does not yet have a recommendation.

“If cash flow does not present an issue, I would personally prefer the tax deferral program to help our taxpayers that are currently in need of relief,” he added.

Groton Utilities in late March stopped charging late fees until further notice, said General Manager of Customer Service Tina Daniels. Customers who didn’t pay their previous month’s bill are sent a reminder saying GU understands the hardships and urges customers to work out payment plans. Customers also receive a list of agencies helping with utility bills and other needs.

The Ledyard Finance Committee voted last week to recommend the Town Council adopt the 90-day property tax deferral for eligible taxpayers. Ledyard Tax Collector Kathy Demicis said the tax deferral program was more manageable than the low-interest program. She estimated 20% to 25% of Ledyard’s taxpayers would qualify for a deferral.

The Stonington Board of Selectmen voted unanimously last week to offer property taxpayers suffering hardships in the COVID-19 emergency the 90-day deferral for property tax and sewer bills.

“We do not want any resident or local business that is suffering financial hardship because of COVID-19 to worry about their upcoming tax or sewer use bills,” said First Selectwoman Danielle Chesebrough. “It was important for the Board of Selectmen, in consultation with Board of Finance members, to take quick, decisive action to help our taxpayers and businesses during these unprecedented times.”

Information and a one-page deferral application will be posted on the town website. The town is asking taxpayers who can pay both the July 2020 and January 2021 property tax installments to do so to help offset revenue shortfalls. Stonington town officials worry that the usual annual tax collection rate of about 99% could drop substantially, creating a cash flow problem.

Chesebrough said the deferment is for people who really need it, not a 90-day delay “to use for other reasons.”

The East Lyme Board of Selectmen also has adopted the 90-day tax deferral program for taxpayers facing financial hardships. Applicants must fill out a form on the town website detailing their need for a deferral. Notices about the deferral program will be mailed with tax bills in June.

“It remains to be seen how many people will need this tax deferment,” East Lyme First Selectman Mark Nickerson said Thursday. “A lot of families will be hurting, that’s not a question. We will work through it. I’m not worried about it. I won’t lose sleep over it. We have some cash reserve. We have the rainy-day fund, we will still have taxes coming in.”

Town Finance Director Anna Johnson said East Lyme expects to spend about $13 million in expenses in July and August. Last year, the town collected some $11.1 million in property taxes through mortgage company escrow payments, which will not be subject to deferral. The town has a fund balance of $6.2 million, 8.4% of this year’s budget.

“In looking at what our unassigned fund balance is, what the escrowed taxes are and what we expended in July and August (last year), it looks like we will be able to manage,” Johnson said.

Lyme First Selectman Steven Mattson said town finances are in good shape to weather a tax relief program. The proposed 2020-21 budget is a 3% decrease from this year. The biggest question, he said, is how many taxpayers would not be able to make tax payments at all because of job loss, and for how long.

The Board of Finance on Wednesday discussed a proposed 90-day property tax deferral for affected residents, and the Board of Selectmen is expected to vote Monday to select one of the governor’s proposed options.

“Tax deferment has the potential of significantly impacting the town fund balances, while interest rate relief’s impact would be at a lower level,” Mattson said. “Both have the advantage of reducing the costs to taxpayers who need to delay the payment of their taxes.”

Waterford First Selectman Rob Brule said he will recommend that the Representative Town Meeting adopt the state’s 90-day deferment, and said other town officials such as  the tax collector, utility commission chairperson, finance director and assessor, utility chief engineer and town counsel all support the option.

He said the deferment will afford people and businesses “substantial additional time without any interest penalty to cope with the devastating effects of the virus on all our lives.” 

Brule said the interest rate reduction program is “relatively modest,” somewhat confusing and would cause a small loss of revenue to the town, whereas “the only challenge” with the deferment is a delay in receiving tax revenue.

The Preston Board of Selectmen are slated to discuss and vote on the options Thursday.

c.bessette@theday.com

Day staff writers Greg Smith, Amanda Hutchinson, Sten Spinella, Mary Biekert, Joe Wojtas and Kimberly Drelich contributed to this report.